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Existing and former International Crisis for Handelsbanken Bank

 In 1887, the bank faced a crisis with lumps of losses which they were able to clear.
 In 1969, Handelsbanken was criticised by media and also by foreign exchange
transactions for moving against the regulations.
 In 1970, Banks management and CEO resigned due to the recent crisis.
 In 1990, Sweden entered a severe financial crisis, which was compounded by the credit
expansion of the late 1980s and a financial bubble related to real estate prices. Many of
the Swedish banks were stricken by this crisis and had to be rescued by the government,
which led to some of the banks being temporarily nationalised. Handelsbanken was
least affected of the major Swedish banks and was able to expand its market share in
the 1990s (It could also be described as a situation in which asset prices appear to be
based on implausible or inconsistent views about the future.)
Information based on 2018
 Svenska Handelsbanken AB has for decades been Sweden’s second-largest bank by
market capitalization, dwarfed only by its mighty rival Nordea Bank AB. But in the
past few weeks, its position has tumbled to No. 4.
 Handelsbanken is now valued at 208 billion kronor ($23 billion), lagging behind SEB
AB and Swedbank AB. Nordea weighs in at about 390 billion kronor.
 In the past ten years, Handelsbanken being relegated to fourth place was almost unheard
of. While it has been overtaken by either Swedbank or SEB for periods since late 2008,
this is the first time both have outflanked it simultaneously. You need to go all the way
back to 2007 for the last occasion when Handelsbanken spent a few weeks out of the
top three.
 Handelsbanken is also the least-popular major Swedish banking stock, suggesting it
could be stuck at No. 4 for a while.
 Handelsbanken has more sell ratings than any other major Swedish bank
 It’s not the first time Handelsbanken has fallen out of favour. In the mid-2000s, question
marks were raised about its decision not to expand in rapidly growing Estonia, Latvia
and Lithuania where other Swedish banks were establishing themselves.
Handelsbanken’s de-centralized and customer-focused stance and reliance on physical
branches was long praised as a model other lenders should copy,
 Handelsbanken has a unique business model centring on the local offices, and I think
that the market has increasingly started to question that strategy in this digital era,” said
Rane. “The more fundamental question is whether Handelsbanken’s local office
strategy will work in the long run.”
For the year 2017 profitability.
Operating profit rose by 2 per cent to SEK 21,025 million.
Financial Performance

Loan losses went down to SEK -466 million (-716), and the loan loss ratio fell to 0.48 per
Operating profit rose by 112per cent to SEK628 million (296), chiefly due to lower loan losses.
Profit before loan losses improved by 8per cent to SEK 1,081 million (1,005), partly as a result
of greater customer activity. Exchange rate movements had a positive impact on operating
profit of SEK 5 million, and expressed in local currency, profit before loan losses rose by 6 per
cent. The return on allocated capital increased to 9.7 per cent (4.8). Net interest income rose by
2 per cent to SEK 1,714 million (1,686), which was attributable full to exchange rate
movements, and, expressed in local currency, remained largely unchanged year on year.
Increased lending volumes contributed SEK 69 million, while lower lending margins reduced
net interest income by SEK -72 million. Improved deposit margins and higher deposit volumes
increased net interest income by SEK 8 million. Fees for the Swedish Resolution Fund and the
deposit guarantee increased by SEK 31million, burdening net interest income by SEK-74
million (-43). Net fee and commission income rose by 14 per cent to SEK 433 million (379).
The increase was attributable to greater customer activity in most commission areas, but
particularly in the savings business, thus yielding higher brokerage fees and asset management
commissions. Exchange rate movements had a positive impact of SEK 7 million on net fee and
commission income.Net gains/losses on financial transactions grew to SEK 95 million (75),
primarily due to an increase in early loan repayment charges, but also a result of improved
currency gains.Expenses rose by 2 per cent to SEK -1,176 million (-1,150). Adjusted for the
effect of exchange rate movements, expenses remained largely unchanged.

Loan and lose 2017


Loan losses decreased slightly to SEK -1,683million (-1,724) and the loan loss ratio went down
to 0.08 per cent (0.09). Net impaired loans decreased slightly to SEK 2,785 million(3,103),
equivalent to 0.13 per cent (0.16) of
lending.
Financial overview 2017
• Operating profit rose by 2 per cent to SEK 21,025 million.
• The period’s profit after tax for total operations decreased by 1 per cent to SEK 16,102
million.
. • Earnings per share for total operations decreased to SEK 8.28
• Return on equity for total operations declined to 12.3 per cent.
. • Income increased by 2 per cent to SEK 41,674 million
• Net interest income increased by 7 per cent to SEK 29,766 million.
• Net fee and commission income rose by 6 per cent to SEK 9,718 million.
• Continued growth in lending and growth in assets under management in all home markets.
• The C/I ratio rose to 45.5 per cent.
• The loan loss ratio went down to 0.08 per cent.
• The common equity tier 1 ratio decreased to 22.7 per cent after the proposed dividend, and
the total capital ratio was 28.3 per cent.
• The Board is proposing an ordinary dividend of SEK 5.50 per share and a bonus of SEK 2.00
per share and that the existing mandate to repurchase shares is extended for a further year.
Handelsbanken Sweden comprises branch operations in five regional banks, as well as the
operations of Handelsbanken Finance, Easter and Stadshypotek in Sweden. At Handelsbanken,
the branches are the base of all operations, with responsibility for all customers of the Bank.
The regional banks offer a full range of banking services at 402 branches and meeting places
throughout Sweden. Handelsbanken Finance offers finance company services and works
through the Bank’s branches.
JANUARY – SEPTEMBER 2018

Financial performance

Operating profit declined by SEK 165m to SEK 10,070m (10,235) and the return on equity
was 15.4% (15.4). Net interest income rose by 3%, or SEK 426m, to SEK 12,749m (12,323).
Higher lending volumes increased net interest income by SEK 606m, while lending margins
had an impact of SEK -63m. Net interest income from deposits improved by SEK 114m, chiefly
attributable to higher volumes. Government fees increased by SEK 261mto SEK -1,039m (-
778), of which fees to the Swedish Resolution Fund rose to SEK -859m (-609). Net fee and
commission income declined by 9% or SEK 285m to SEK 3,003m (3,288), while mutual fund
commissions decreased by SEK 247m to SEK 655m (902). As of 2018, commissions are
reported by the new securities market regulations – MiFID 2. Consequently, the mutual fund
commissions that the branches receive as distribution remuneration from the fund management
company were SEK 366m lower year-on-year. The corresponding commissions are instead
recognised in the Capital Markets segment and the Handelsbanken Sweden segment in the
profit allocation line. Adjusted for the change in the model, mutual fund commissions rose by
13%. Brokerage income from discretionary management was also lower due to MiFID 2.Net
gains/losses on financial transactions totalled SEK 503m (496).Total expenses rose by 6% to
SEK -6,090m (-5,765).Staff costs went up by 3% to SEK -2,667m (-2,580). The average
number of employees rose by 1% to 4,106 (4,076). Progress is being made in work to increase
efficiency and to digitalise administration and routine work. The Bank has initiated an effort to
use artificial intelligence(AI) in the extensive re-examination of investment advisory services.
Digital support for investment advisory services has also been improved. Together, these
measures have resulted in a decrease in the total number of working hours per advisory session.
At the same time, the number of advisory sessions has increased by 70% compared to the
previous year, and business volumes have also increased Expenses for services bought and sold
internally increased by 11% to SEK -2,552m (-2,297), mainly due to higher development costs.
The C/I ratio was 34.4% (33.7). Loan losses were SEK -141m (-141), and the loan loss ratio
was 0.02% under IFRS 9 (IAS 39: 0.02). Business development Just as in previous years, the
major Swedish Quality Index (SKI) survey found that Handelsbanken is “Best among the major
banks”. The survey asserts that “those businesses that succeed in combining a digital presence
with a personal touch are rewarded with more satisfied customers”. Among private customers,
Handelsbanken earned a score of 72.3, meaning that the gap between the Bank and the sector
average, as well as between the Bank and the other three major banks, has grown since the
previous year. The other major banks recorded scores in the 58.5 – 65.7 range. For corporate
customers, Handelsbanken’s index value was 67.7, as compared with the other major banks,
all of which recorded scores in the 56.6 – 61.9 range.
In the annual survey, Handelsbanken has once again been voted Business Bank of the Year –
for the eighth year running – and Sweden’s Small Enterprise Bank – for the seventh year
running. The year’s survey once again provided evidence that corporate customers appreciate
Handelsbanken’s unique business model. Handelsbanken continues to have major inflows of
new business volumes in Sweden – regarding both savings and lending. New savings in the
Bank’s mutual funds in Sweden totalled SEK 13.5bn (16.1), corresponding to a market share
of 35%. At the same time, deposits increased. Statistics – which are available up until the end
of August –showed that during the first eight months of the year, 23%of the net increase in
household deposits in Sweden went into accounts at Handelsbanken. The average volume of
mortgage loans to private individuals rose by 7% to SEK 775bn (726), while deposits from
households grew by 9% to SEK 343bn (316). The average volume of corporate lending went
up by 5% to SEK 509bn (485), while corporate deposits increased by 8% to SEK 243bn.
Two new branches were opened during the third quarter, while seven branches were merged
with nearby larger branches. As a result, Handelsbanken had 391 branches and eleven meeting
places in Sweden, meaning a combined total of 402 branches and meeting places.

Profit for the year 2018

Operating profit went up by 3% to SEK 3,480m (3,382), and return on allocated capital was
15.7% (16.1). Net interest income went down by 1% to SEK 4,232m (4,276). Increased lending
volumes made a positive contribution of SEK 40m, while lending margins decreased by SEK
18m. Net interest income from deposits rose by SEK 9m. Government fees burdened net
interest income by SEK -346m (-349). The benchmark effect in Stadshypotek had a negative
impact on net interest income, reducing it by SEK -24m to SEK 1m (25). The gross margin on
the mortgage portfolio – before advisory and administrative expenses declined slightly to
1.05% (1.06). Both deposit and lending volumes rose by 1%. Net fee and commission income
grew by 7% to SEK 1,055m (989), chiefly due to higher payment income. Net gains/losses on
financial transactions totalled SEK 164m (190). Expenses fell by 3% to SEK -1,983m (-2,048).
Staff costs increased by 1%, due to a rise in the average number of employees from temporary
staff over the holiday period. Loan losses consisted of net recoveries and totalled SEK
ROA, ROE & EM ratios of Handelsbanken Bank for 2016 & 2017

ROA, ROE & EM for the year 2017: -

 ROA (Return on Assets) = profit after tax / average total assets


Average total assets = (opening assets + closing assets)/ 2
Average total assets = (2627580 + 2766977) / 2
= 2697278.5
Therefore, ROA = 1610 / 2697278.5
= 0.0005969 //

 ROE (Return on equity) = (Profit after tax – preference dividend) * 100


Total equity
Profit after tax = 1610
Preference dividend = 0
Total Equity = Assets – liabilities
= 2766977 – 2625373 = 141604
Therefore, ROE = [ (1610 – 0) / 141604] *100
= 1.13697353 //

 EM Ratio

Net worth = ASSETS – LIABILITIES


= 2766977 – 2625373 = 141604 //

ROA, ROE & EM Ratios for the year 2016: -


 ROA = Profit after tax / Average total assets

Average total assets = 2627580 + 2522133/2 = 2574856.5


ROA = 16245/ 2574856.5 = 0.00630901 //

 ROE = [(Profit after tax – preference dividend)/ Total equity] * 100


Total equity = 2627580-2491199 = 136381/

Therefore, ROE= [(16245-0)/136381] * 100


= 11.9114832//

 EM Ratio
Net worth = TOAL ASSETS – TOTAL LIABILITIES
= 2627580 – 2491199 = 136381//

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